A. Consumer Reality Impact:
All, if not most, of the major corporations in Liberia that utilize in the upwards range of between 5-20MW a day in electricity consumption are not connected to LEC. They rely on their own form of self-generation. The Liberian Agricultural Company, Firestone, AccelorMittal, Sime Darby Plantation, the Liberia Coca Cola Bottling Company, U.S. Embassy, all Major Banks, Hotels, mining companies, etc…, rely on their own source of generation. With the few companies listed above, if LEC was to be the electricity supplier of choice they would have to generate over 150MW of safe, reliable and affordable electricity a day for them. All of the above mentioned entities would represent consistent and reliable paying customers. So the question is “Why has electricity been so elusive”? Here are some of the reasons within the Liberian current electricity context.
1. Most of the high industrial users are in remote areas and the transmission and distribution lines have not yet reached their location for connection.
2. Constructing the major transmission and distribution lines takes time and has high cost implications.
3. Liberia cannot afford the high cost required to construct and implement the required infrastructure and resources to establish a grid of the future. Liberia has turned to the international community for grants and subsidies and affordable capital financing. These funding sources have prerequisite requirements that take time to achieve and also ties you to the donor’s agenda.
4. The current market does not generate enough capital for there to be a market for the consumption of electricity at an affordable rate without the subsidies of the International Community and/or the Government of Liberia.
5. Independent private power producers that have expressed interest in getting into the power generation business with minimum take and pay agreement discover that the Liberian market is not yet mature to fit their business model. There is too much uncertainty.
6. Liberia is in the early stages of forming the regulatory commission that will be responsible for licensing and the tariff rates and ensuring national security of the grid.
7. The governance and regulation required by private investors was not established.
8. Strategic allocation of limited financial resources to other key national development areas.
B. Ebola Crisis Impact to the Liberia: Inputs to the Energy Access Action Plan, 2012 – 2030.
The impact and pain of the Ebola Crisis on the Liberia Electricity Sector is an added sore that will be felt for quite some years and may only be shortened by the advancement in technology in the electricity sector, the rain and dry season climate, an exponential growth in our economy, or an abundance of international aid to the electricity sector. The anticipation was that by 2015 Manitoba Hydro international (MHI) would have 33,000 connections, resulting in 160,000 people having access to electricity. LEC would be providing about 66.4MW of consumable electricity with an estimated cost to connect a customer at roughly $1,000(Liberia: Inputs to the Energy Access Action Plan, 2012 – 2030, pg 5). Currently LEC generates about 16-20MW and the transmission and distribution lines are only able to distribute 10-12MW to the consumer. There is still a demand for an anticipated 75MW. However, the transmission and substation needs to be built to deliver this supply. The good thing is that Mt. Coffee comes on board during the dry season when it produces only 8MW of its 64MW production capacity. This will give LEC more time to connect more customers albeit at a slower rate due to the wet season. One downside to electricity is that it cannot be stored, if you over produce electricity then your economic efficiency will suffer and power will be wasted. LEC looks to find the right balance where they can constantly recuperate a significant portion of their cost through a steady consumption.
Production and Pricing
A. Production & Consumption: The total amount of customer connected to the LEC Transmission and Distribution grid is enough to consume between 10 – 16 MW of electricity. The rule of thumb is that on average, 1MW can power about 1000 homes; in Liberia it may average to about 2000 or 3000 due to factors such as high tariff rate, self-generation, intermittent power outages, pre-paid electricity, limited number of electrical devices in households as compared to the developed world, businesses’ reluctance to rely on LEC due to inconsistencies in reliability.
B. Wholesale Cost & Retail Price:“Due largely to expensive diesel production, Liberia has one of the highest public tariffs in the world (in October 2012 $0.52/kWh). The tariff is calculated on a quarterly basis taking into account the price of equipment, service schedule, cost of overhauls, 20 percent of technical and nontechnical losses; US$0.02/kWh for distribution operation and maintenance costs, the LEC’s administrative costs, and a 93 percent efficiency in collections. The generation cost is estimated at US$0.32/kWh. The cost of self-generation is estimated at no less than US $0.75/kWh. The GoL subsidizes the balance of LEC’s costs and is expected to continue doing so during the transition to cheaper medium-term generation options now under active investigation and planning. The current retail price of electricity ranges from $0.52 – $0.55 per kWh.The high cost of diesel makes Liberia one of the countries with the highest tariff globally.” (Energypedia – Liberia)
Tariff: This is the price that consumer will pay for electricity upon delivery. Currently the tariff is set at US$0.52 to US$0.55 cents per KWh. The goal is to get the tariff down to about $0.13 – $0.17 cents. Your tariff consists of incurred charges as electricity travels down its value chain and is delivered to the consumer. This tariff is one of the highest in the world especially for a country like Liberia. In Los Angeles County, U.S. the average price is between US$0.11 cents to US$0.14 cents per kWh, and the per capita income is US$42,042, compared to Liberia at US$0.52 per KWh with a per capita income of US$457.90. In Nigeria the price per KWh ranges from US$0.02 to US$0.19. At the low range we find the consumer who may only have a light bulb that is used on occasion; at the high price range you have the high-end residential, commercial and industrial consumer. The majority of Nigerian residential consumers are in the US$0.11 tariff, Liberia is paying roughly 5 times that amount at the moment in comparison to Nigeria and Los Angeles.
With the recent price of fuel down, one may argue that the savings should be felt instantly by customers but this simplistic impetuous economic reasoning must be given serious consideration within the Liberian electricity context, and an important question needs to be asked and the answer understood:“What is the supply chain for electricity and where are the add values and costs?
Work Cited and Research Articles
1. West African Power Pool: Environmental and Social Impact Assessment (ESIA)
2. Ministry of Lands, Mines & Energy: Energy Briefing for Partners (Power Point Presentation for Partners)
3. Energypedia: https://energypedia.info/wiki/Main_Page
4. Electric Reliability Council of Texas: http://www.ercot.com/mktinfo/
5. Electricity Local: http://www.electricitylocal.com/states/california/los-angeles/
6. Global Subsidies Initiative:“A Citizen’s Guide to Energy Subsidies In Nigeria;” produced by Center for Public Policy Alternative (CPPA) and the international Institute for Sustainable Development’s Global Subsidies Initiative. https://www.iisd.org/gsi/resources/introductions-non-experts/citizens-guide-energy-subsidies-nigeria
About the Author: William Thomas Bernard King works for Southern California Edison (SCE), one of the largest private electricity utility companies in the United States and the company with the biggest renewable energy portfolio. In 2014 SCE delivered 17.7 billion kWh of renewable, roughly 24% of all the electricity delivered. William’s 10 years at SCE has afforded him the opportunity to comprehend the business of electricity and the constraints of providing safe, reliable, and affordable electricity. He frequently visits Liberia to see his family and in 2012 spent 3 months visiting and exploring the country. If you would like to share a comment with William, his email is: [email protected]